Viewpoint: Local option sales tax for county roads
For the last several years, the Goodhue County Board has been discussing ways to bridge the gap between county road construction needs and the available funding. The county has urged state and federal leaders to increase transportation funding to help with unmet needs in Goodhue County and in rural America.
Goodhue County's funding gap to preserve the existing road system is approximately $10 million annually and the increased funding for highway construction coming from the state transportation bill this year is a little over $250,000 for 2018. The amount of increased transportation funding from the state is almost enough to grade one-fifth of a mile of a road. Goodhue County has 402 miles of road and 200 county bridges to maintain.
This article is dedicated to provide information of the funding gap, local option sales tax, other options and provide answers to the most frequently asked questions.
$10 million annual gap in funding?
The annual funding gap in Goodhue County's State Aid Highway Construction program is approximately $10 million.
This gap is not unique to Goodhue County as this is unfortunately a familiar problem among the counties across the country and in Minnesota. This is calculated based on the current number of miles the county is grading, paving and overlaying over a five-year period versus how much the county should be doing to make a road last 50 years.
As an example, the county has graded 2.06 miles of road on average in the last five years and the county should be grading 6.86 miles annually leaving a deficit of 4.8 miles at $1,663,093 per mile (five-year average grading cost per mile) or $7,982,845 annual deficit just in grading.
The entire calculation can be found on the county website under our May 16, 2017, Committee of the Whole meeting or at www.co.goodhue.mn.us/AgendaCenter/ViewFile/Agenda/_05162017-1028?html=true.
Beyond knowing the $10 million per year preservation funding deficit, what is also important is knowing what is not included in that calculation — bridges, safety equipment such as guard rails and expansion projects like Trunk Highway 52.
Based on current funding and construction costs, the average replacement age of the county roads is 158 years. The county has over 130 miles over 50 years old and within 10 years, another 170 miles will also be over 50 years old.
What is the optional sales tax and what can it be used for?
In 2013, the Legislature approved to allow counties outside the metropolitan area to impose a "transportation sales and uses tax" at a rate up to one-half of 1 percent on applicable retail sales and uses. Any item that is subject to the current state general sales tax will be subject to the local optional sales tax. Any item exempt from the general sales tax would be exempt from the local optional sales tax.
The local optional sales tax is tied to the general sales tax so it is not applicable to motor vehicles since the general sales tax is not. Since motor vehicles are not subject to the local optional sales tax, counties are allowed to include a flat $20 excise tax on commercial sales of motor vehicles when establishing the local optional sales tax.
If the county commissioners decide to adopt the local option sales tax, they also need to decide if they will adopt the $20 vehicle excise tax.
The proceeds from these taxes must be dedicated exclusively to the capital costs of a specific transportation project or improvement, certain costs of transit projects, or capital costs of a Safe Routes to School program. The County Board must designate the projects to be funded with the proceeds of the taxes, and the taxes must terminate when revenues raised are sufficient to finance the projects. These funds cannot be used for maintenance, paying staff, buying equipment or constructing buildings.
A half-percent sales tax could generate approximately $1,700,000 annually for Goodhue County roads.
What other options does the county have?
The county could consider a number of other options:
1) Continue to urge state and federal legislators to bridge the gap in rural highway funding;
2) Raise local levy and dedicating those funds for highway and bridge construction;
3) Adopt $20 per vehicle excise tax on vehicles purchased from retail dealers in the county;
4) Bond for highway and bridge construction;
5) Increase the wheelage tax from $10 to $20 per vehicle per year;
6) Reduce or eliminate county services (non-mandated county services that remain include — road patrol, snow plowing, Minnesota Extension, Sentence to Serve and Geographic Information Systems).
Frequently asked questions
Why do counties need to consider other forms of revenue to bridge the transportation gap?
The federal, state, and local funding has not kept pace with inflation and construction costs. The federal gas tax has not increased since 1993 and the state gas tax has not increased since 2008 when the increase was phased in over five years.
The cost of bituminous has gone up 208 times since the federal gas tax increase and 43 times since the state gas tax increase. We are building roads with today's costs and yesterday's dollars.
The increase in state funding for 2018 represents 1/40th of the county annual shortfall or 1/400th of our shortfall over the next decade to preserve our roads.
How long would the proposed ½ cent general sales tax be in place?
Ten years or until the plan is completed whichever comes first.
What is in the plan for this funding?
The quickest way to review the plan is to go to the county website and look at the Sept. 5 agenda item under the Public Works director or at www.co.goodhue.mn.us/AgendaCenter/ViewFile/Agenda/_09052017-1062?html=true . Otherwise here is a list of road numbers that have proposed work on them (if they are listed more than once it is more than one project) 1, 5, 10, 24, 27, 66, 1, 21, 53, 8, 8, 14, 2, 6, 2, 6, 12, 48, 53, 4, 18, 19, 11, 6, 7, 11, 21, 24, 25, 62, 100th Avenue (will become 1), 14, 8, and 11.
Can the plan be amended?
Yes, the County Board with a public hearing and a resolution can amend the proposed plan.
Will the optional sales tax take care of the funding gap?
It will help bridge the gap, but there will be an approximately $8.3 million annual funding gap remaining in road preservation (don't forget bridges, safety projects and TH 52) even with the implementation of an optional sales tax. Over a 10-year period this funding gap is approximately $83 million assuming inflation does not occur.
Is Goodhue County the only county considering taxes for transportation?
There are 54 counties using the wheelage tax and 38 using the local optional sales tax. In addition there are many still considering both options. Of the counties bordering Goodhue, Dodge County is the only county that does not have the local optional sales tax.
What is the difference between the wheelage tax and the local option sales tax?
The wheelage tax is an additional excise tax ($10 to $20) paid by county citizens when they purchase their annual vehicle license tabs. These funds are authorized by the County Board and the funds raised are kept in the county.
The local optional sales tax is an additional tax on all goods purchased in the county that is subject to the state's general sales tax; paid by a resident, visitor or someone just passing through.
One hundred percent of wheelage tax is paid by county residents, while only a portion of the local optional sales tax is paid by residents of the county. Counties that have a sufficient number of tourists and other visitors may consider using the local optional sales tax so those visitors can help pay for the infrastructure they use while in the county.
Has the county really held all of these meetings in the dark with no notice to the public?
No, the County Board has had transportation funding in its County Board goals every year since the year 2000. The County Board has had numerous open public meetings and has specifically been talking about the local option sales tax since 2013.
Just this year, the County Board has talked about it on Jan. 18, Feb. 21, May 16, June 13, June 30, Aug. 10, Aug. 15, held an advertised public hearing on Sept. 5 and will discuss it again on Sept. 19.
How can I get notified on upcoming Goodhue County meetings?
There are numerous ways to get notified. You can review any agenda and packet information on the county website and you can request to be notified of all agendas at www.co.goodhue.mn.us. All of the county notices, minutes and legal publications are published in the Red Wing Republican Eagle and they notify all of the other newspapers in the county due to Goodhue County's joint publication bid. Many topics are also covered in the news on your local radio station.
What will happen on Sept. 19?
On Sept. 19, the County Board will hold its regular meeting where one of the agenda items is to consider the implementation of the optional sales tax. The board will consider all of the information they have received on this subject including the testimony provided during the Sept. 5 public hearing. The County Board will have the choice to adopt, not adopt, table for future consideration or provide staff direction on further study areas.